Google's market cap has now grown to approximately $249.2 billion, edging past Microsoft's $248.7 billion valuation. Many analysts view this decline as a sign of the times, with Microsoft's traditional power base of desktop and laptop machines being disrupted by a new generation of tablets and smartphones operating on cloud-based applications. Daily Chart

Weak earnings from Hewlett-Packard (HPQ: Charts, News) and Dell (DELL: Charts, News) have confirmed this trend, which reflect a decline in traditional PC business on both the hardware and software levels. Wedge Partners analyst Martin Pyykkonen commented, "The transition here is pretty straightforward in terms of where things have moved to and certainly that's cloud, that's Web. Today, only Apple's market cap of $632.9 billion tops Google in the technology sector. When Apple passed Microsoft in 2010 to become the world's largest technology company, Microsoft CEO Steve Ballmer quoted Benjamin Graham, stating, "In the short run, the market is a voting machine, but in the long run it is a weighing machine." At the time, Ballmer assured journalists and investors that Microsoft was intrinsically more valuable than either Apple or Google. However, based on current trailing P/E ratios, Microsoft, Apple and Google are all fairly valued with respective ratios of 14.8, 15.7 and 22.5 - none of the stocks are fundamentally overvalued. Ironically, it appears that Ballmer was right - in the long run the market has fairly weighed these companies against his own. In 2008, Ballmer famously mocked Google's newly acquired Android operating system, commenting, "If I went to my shareholder meeting and said: Hey, we've just launched a new product that has no revenue model, I'm not sure that my investors would take that very well. But that's kind of what Google's telling their investors about Android." In the most recent quarter, Google's Android operating system powered 52% of smartphones worldwide, up from 43% a year earlier. Apple is currently in second with 19%, while Microsoft has a tiny footprint of 2.7%. Meanwhile, Google controls 66% of the U.S. search market, while Microsoft's Bing search engine holds 16%, despite Microsoft's best efforts to coin "Bing" as a verb through product placement and advertisements. Google is also on track to overtake Facebook (FB: Charts, News) in the U.S. as the largest outlet for display advertising. Google's cloud-based Apps are also challenging Microsoft's traditional revenue source from Office software, while its fledgling Chrome OS has been recognized as a threat to Microsoft's core of Windows operating system revenue. Windows sales have also plunged as customers choose Android and iOS tablets over lower end Windows laptops. New hybrid tablets, which can be converted into laptops, such as Asus' Transformer series, have also become a threat to traditional systems running Windows 7. Microsoft has recognized this threat, which it intends to address with Windows 8, which is designed specifically for touch-screen technology. Microsoft's new Surface tablet, which runs on the new operating system, is also intended to compete directly with iOS and Android devices. Google has also introduced its own tablet, the Nexus 7, which is intended to compete directly with Amazon's (AMZN: Charts, News) Kindle Fire tablet, the best-selling Android tablet in the United States, rather than Microsoft's Surface. Analysts at Jefferies noted that Google is well positioned for long-term growth, since it is experiencing healthy growth in its core search business as well as its mobile, display and online advertising segments. Journalists at Barron's also highlighted Google's low multiple in comparison to industry peers Facebook, Baidu (BIDU: Charts, News) and Yandex (YNDX: Charts, News). Baidu in China and Yandex in Russia are Google's primary international rivals. Baidu signed a search deal with Apple this year, while Yandex unveiled its own web browser with integrated search features earlier this week. Shares of Google trade at 15.4 times forward earnings with a 5-year PEG ratio of 1.2. The stock has bounced in a wide 52-week range between $480.60 to $764.89. Other News About GOOGHere's Why Google is Beating Microsoft Google takes over Microsoft as PC sales weaken. Google Passes Microsoft's Market Value as PC Loses to Web Are Microsoft's best days behind it? Other Stocks in the NewsApple iPad Mini Rumor Roundup Is the release of the iPad Mini inevitable? That Apple Reputation Problem - Did It Just Get Even Bigger? Can Apple, the largest company in the world, really get any bigger? Copyright 2012 by InvestorGuide.com, Inc. InvestorGuide has no control over the sites we link to, is not affiliated with these sites, and cannot take responsibility for their quality or suitability. The news, analysis, commentary and profile information is not meant to be comprehensive, and the data provided is not guaranteed to be accurate. WebFinance Inc., the publisher of this newsletter, is not a registered investment advisor or a broker/dealer. This is not a stock recommendation newsletter but rather a source for investment ideas, and we encourage you to fully research any company before considering investing. The opinions expressed herein are those of the author and do not necessarily represent the views of nor are they endorsed by WebFinance Inc. No employee of WebFinance has owned or currently owns any shares in the company described above. The above is neither an offer nor solicitation to buy or sell any securities. The trading of securities may not be suitable for all potential readers of this newsletter, and the purchase of stocks mentioned in this newsletter may result in the loss of some or all of any investment made. We recommend that you consult a stockbroker or financial advisor before buying or selling securities or making investment decisions. 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Published on Oct 2, 2012

By Leo Sun

Leo Sun is a freelance finance writer and position trader. He focuses on a combination of value and momentum investing, with a strong interest in the trading philosophies of Warren Buffett and Peter Lynch. Leo also has experience writing articles to help small business owners acquire loans and manage their finances. He regularly contributes to the Stock of the Day analysis.